The Predictive Ability of Several Models of Exchange Rate Volatility

51 Pages Posted: 12 Jun 2000 Last revised: 4 Jun 2018

See all articles by Kenneth D. West

Kenneth D. West

University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

Dongchul Cho

Korea Development Institute (KDI) - Macroeconomic Policy Division

Date Written: January 1994

Abstract

We compare the out-of-sample forecasting performance of univariate homoskedastic, GARCH, autoregressive and nonparametric models for conditional variances, using five bilateral weekly exchange rates for the dollar, 1973-1989. For a one week horizon, GARCH models tend to make slightly more accurate forecasts. For longer horizons, it is difficult to find grounds for choosing between the various models. None of the models perform well in a conventional test of forecast efficiency.

Suggested Citation

West, Kenneth D. and Cho, Dongchul, The Predictive Ability of Several Models of Exchange Rate Volatility (January 1994). NBER Working Paper No. t0152. Available at SSRN: https://ssrn.com/abstract=225140

Kenneth D. West (Contact Author)

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States
608-262-0033 (Phone)
608-262-2033 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Dongchul Cho

Korea Development Institute (KDI) - Macroeconomic Policy Division ( email )

P.O. Box 113 Cheongryangri Dong
Seoul 130-012
United States
011-82-2-958-4046 (Phone)
011-82-2-965-0393 (Fax)

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